The 21-story, 495-room Drake Hotel had been constructed in 1926 at the corner of Park Avenue and 56th Street.[1] In January 2006, the hotel's owner, Host Hotels & Resorts, was intending to sell the property "in the mid-$400 million range", primarily marketing the site with the prospect of replacing the aging hotel with a mixed-use skyscraper.[2] Harry Macklowe purchased the Drake in 2006 for $418 million[1][3] (equivalent to $580 million in 2021[a]).

Following his acquisition of the hotel, Macklowe paid French delicatessen company Fauchon $4 million to shorten the terms of their lease on the ground floor of the Drake Hotel and vacate in April 2007 instead of 2016. Shortly after the agreement was reached, Fauchon sued Macklowe in New York Supreme Court claiming that the developer was harassing the store to leave by blocking their entrance with scaffolding and threatening to cut off air conditioning and access to the hotel's bathrooms.[4]

In April 2007, Macklowe purchased the Buccellati store at 46 East 57th Street for $47.5 million. This followed Macklowe's purchase of the Audemars Piguet store at 40 East 57th Street for $19.2 million, the Franck Muller store at 38 East 57th Street for $60 million, as well as 44 and 50 East 57th Street for $41 million.[1][5][6] Following over 14 months of negotiations, Macklowe also had to pay Audemars Piguet $16.6 million to end their lease early and move across the street to 137 East 57th Street.[7] The total cost of additional nearby parcels and air rights brought the acquisition cost to over $724 million and yielded a large L-shaped site between 56th and 57th Streets.[1] In early 2007, Macklowe Properties secured a $543 million mortgage from Deutsche Bank on the site.[5] Macklowe was said to be planning a 65-story Armani-branded tower that would consist of three stories of retail, offices until the 20th floor, topped by a 10-story hotel and 33 floors of residential space.[8]

Additionally, Nordstrom had signed a letter of intent to open their first New York store, a 253,500 square feet (23,550 m2) flagship, at the building's base. Macklowe had been in contract to purchase the Turnbull & Asser storefront at 42 East 57th Street for $33 million but the company's owner executed a call option in the store's lease to allow him to buy the building for $31.5 million instead. Jacob & Co's founder Jacob Arabo also demanded $100 million for the store's building at 50 East 57th Street, a price Macklowe was unable to pay. These holdouts meant Macklowe was unable to connect the other buildings he owned on East 57th Street, depriving Nordstrom of the space needed for the store's ground floor entrance.[1] Nordstrom also reportedly required a 18-foot-high (5.5 m) ceiling, which was not feasible at the site.[9] This caused Nordstrom to back out of the deal and instead open their flagship in Central Park Tower several blocks west on 57th Street.[10]

In October 2007, the New York City Department of Buildings issued demolition permits for the site; at the time, the demolition cost was estimated at $6 million, or roughly $15 per square foot ($160/m2).[11] During the financial crisis of 2007–2008, Macklowe defaulted on the Deutsche Bank loan which was due in November 2007.[12] In October 2007, Harry Macklowe personally repaid $156.3 million of Macklowe Property's debt on the site, bringing his personal investment in the project to over $250 million.[1] The repayment included $38 million of mezzanine loans with a 15 percent interest rate that were held by Vornado Realty Trust.[13] In May 2008, hotelier Kirk Kerkorian and investment company Dubai World reportedly considered purchasing the site for $200 million in addition to assuming the existing debt on the property.[14]

The bank sued in August 2008 to begin foreclosure on the loan (which had amortized down to $482 million at the time) and take control of the development site.[1] Deutsche Bank had divided the loan into 21 tranches and sold much of the debt to ten different investors including Highland Capital Management and Sorin Capital Management, earning tens of millions of dollars in fees.[15] The bank retained just $12 million of the loan on its own balance sheet.[1] During the height of the recession in November 2008, one of the investors, iStar Financial, was unable to find any buyers for its $224 million tranche of the debt for $160 million, representing just over 71 cents on the dollar.[1][16] Initially, over 20 bidders were believed to be interested including Apollo Global Management, The Related Companies, and Silverstein Properties.[17] Only a half-dozen bidders eventually offered between $100 million and roughly $130 million, or 45 and 58 cents on the dollar respectively.[18]

 

Seen from ground level

In late 2007, Joseph Sitt, founder of Thor Equities, introduced Macklowe to an investment firm named CMZ Ventures.[19] The letters "CMZ" represented Arthur G. Cohen, a New York real estate developer; Paul Manafort, a former lobbyist, political consultant, and lawyer; and Brad Zackson, a frequent partner of Manafort and Fred Trump.[20]

In 2008, CMZ Ventures agreed to pay $850 million for the development site which would fully pay off the Deutsche Bank loan and represent a small profit on top of Macklowe's total acquisition price.[21] In fact, the purchase price was higher even than the appraised value of $780 million, a premium of over 10 percent which was unheard of for development site purchases.[19] The partners wanted to build a 65-story building with a Bulgari-branded luxury hotel, condominiums, a private club, and a vertical mall. In late 2008, Dmytro Firtash, a Ukrainian natural gas oligarch and alleged associate of Russian organized crime,[22] agreed to fund $112 million in equity and paid Manafort a deposit of $25 million.[23] The deposit was wired from a Raiffeisen Zentralbank account that U.S. officials alleged was a front for Russian organized crime "boss of bosses" Semion Mogilevich.[24] Manafort had met Firtash while consulting for the pro-Russia Party of Regions, at the time the ruling political party in Ukraine.[21][25] French fund Inovalis also agreed to arrange another $500 million of equity for the project from various backers. Ultimately, the bid fell apart when CMZ could not arrange the necessary financing.[19]

In 2011, the former prime minister of Ukraine, Yulia Tymoshenko, alleged in the United States District Court for the Southern District of New York that Firtash violated the Racketeer Influenced and Corrupt Organizations Act. Specifically, Tymoshenko stated that Firtash had used CMZ as a front organization for funds that he skimmed unlawfully from RosUkrEnergo, the natural gas company that he jointly controlled with Russian state-owned enterprise Gazprom. Tymoshenko also alleged that Firtash planned to use the money for political purposes, rather than as a real estate investment; specifically, she claimed that the money would go to help her opponent, Victor Yanukovych, who became Ukraine's president in 2010.[21]

Another CMZ Ventures investor was Oleg Deripaska, a Russian oligarch and leader of the world's second-largest aluminum company Rusal, who was sanctioned by the U.S. government in 2017. Deripaska agreed to invest $56 million into 432 Park Avenue through an investment fund named Pericles[21] which was managed by Rick Gates, a Manafort partner who has since pleaded guilty to conspiracy against the United States and making false statements in the investigation into Russian interference in the 2016 United States elections.[26]

 

Porte-cochere on 56th Street

In January 2010, CIM Group agreed to pay $305 million for the complete development site including 434 Park Avenue and 38, 40, 44 and 50 East 57th Street while keeping Macklowe involved as a partner.[3][27] The investment by CIM allowed Macklowe to repay the senior-most tranche 90 cents on the dollar while the junior-most tranches were completely wiped out.[12] At the time, the site was considered one of New York's most valuable due to its location between East 56th and 57th Streets on the west side of Park Avenue.[28][29] Citigroup's private banking arm raised an additional $415 million in equity for the project from high-net-worth individuals who invested $1 million to $5 million each. Another $100 million in equity came from CIM's existing institutional investor clients.[29] Following the investment, CIM continued to expand the development site, purchasing 46 East 57th Street for $42.5 million in January 2011.[30]

CIM and Macklowe were sued by Franck Muller in September 2010 after the company tried to evict the watch retailer from their space at 38 East 57th Street that Macklowe had purchased several years earlier for over $60 million. The building was master-leased to a real estate investment company, Sovereign Partners, who in turn had subleased the ground floor and mezzanine space to Franck Muller until 2018. CIM and Macklowe had purchased that master lease for $5.35 million in November 2008, making a CIM-owned company Franck Muller's new landlord.[6] Subsequently, CIM and Macklowe had the building reappraised by Cushman & Wakefield who determined that the fair market rent for the space was $1.4 million per year, higher than the rent initially agreed to by Sovereign Partners. However, the CIM-owned company that had purchased Sovereign Partner's lease failed to pay this increased rent, leading to an event of default under the lease and allowing CIM and Macklowe to begin the eviction process. Franck Muller objected, claiming that CIM was essentially choosing not to pay itself the increased rent and manufacturing an excuse to evict the CIM-owned master lessee and in turn Franck Muller, the sublessee. In October, a New York Supreme Court ordered the case be determined through arbitration instead.[31]

The developers received a $30 million mortgage from Pacific Northwestern Bank on the site in early April 2011.[32] Later that month, CIM filed dummy permits for a 5-story office building[33] in order to begin excavation work on the site[34] and by the following month had hired Rafael Viñoly to design the new tower.[35] Macklowe, speaking at a real estate conference in New York, claimed the building would be "monumental" and a "capstone" to his career.[36] In October, plans were revealed for a 1,300 feet (400 m) tall condominium tower on the site using the address 432 Park Avenue.[37] Previously, CIM had reportedly considered using the building's lower floors as a luxury hotel similar to nearby One57 and spoken to operators including Mandarin Oriental Hotel Group, Taj Hotels, and One&Only Resorts.[38] The next month, CIM purchased Turnbull & Asser's storefront at 42 East 57th Street for $32.4 million and concurrently sold the nearby 50 East 57th Street to the clothier for $31.5 million, allowing CIM to expand their development site and Turnbull & Asser to remain on the same block.[39] In December 2011, LVMH reportedly considered investing in the site for an expansion of the company's "Cheval Blanc" luxury hotel chain, creating a campus with the company's nearby LVMH Tower.[40]

 

Ground up view from 56th Street in July 2014

 

Under construction in March 2015

Excavation for the building's foundations began in early 2012.[41] In March, CIM filed plans for the full building, revealing its 82-story, 1,397-foot (426 m) height.[42] The New York City Department of Buildings issued the construction permit two months later.[43] By September 2012, the building's concrete foundation had been completed[44] and the tower crane had been installed.[45] The building passed street level by the end of the year.[46] As construction progressed, 432 Park's developers raised asking prices for the building's units several times.[47][48] A brochure in June 2012 indicated that units would cost $4,500 per square foot ($48,000/m2),[49] but that rate had increased to $5,800 per square foot ($62,000/m2) by September 2012.[50] By March 2013, asking prices had reached $6,742 per square foot ($72,570/m2).[48]

The project's second crane was installed in early 2012.[51] In October 2012, the development also received $400 million in construction financing from hedge fund The Children's Investment Fund Management.[29] The construction loan carried a low loan-to-value ratio of under 40 percent but an unusually high interest rate of over 10 percent per year.[52] However, the loan was also nonrecourse meaning that the lender could not go after CIM or Macklowe's other assets if they defaulted on the construction loan.[29]

Construction was temporarily halted in February 2013 after crews damaged a neighboring building and the Department of Buildings gave the project several safety violations.[53] Though work resumed within the month, a worker was injured in an on-site construction accident that March, when a piece of wood dropped from the fifth story.[54] In mid-2013, developers filed a revision to the plan to add another floor. This was achieved by converting floor 95, a formerly double-height story, into two separate stories of standard height.[55]

Also in March, sales officially launched from an office at the nearby General Motors Building, with units being listed at between $20 million to $82.5 million apiece. At the time, the developers claimed more than a third of the building's units were already under contract.[56][57][48] To assist with marketing, Macklowe spent $1 million on a four-minute film that would air exclusively in the sales center. The film, directed by Danny Forster and filmed at Silvercup Studios, follows a young woman leaving her English country house in a 1957 Rolls-Royce and taking a Learjet to her new home at 432 Park Avenue.[58] The film also featured famed French high-wire artist Philippe Petit dangling from a helicopter, music by Cass Elliot, references to Mies van der Rohe’s Barcelona Pavilion and the Pantheon, and depictions of King Kong, Le Corbusier, Al Capone, and Anna May Wong.[59]

432 Park Avenue passed the 1,000-foot (300 m) mark in June 2014.[60] The topping out ceremony was held on October 10, 2014, signifying that the building had reached its maximum height.[61] 432 Park Avenue was nearly completed in January 2015 when work was temporarily halted again after another construction accident.[62][63] In November 2015, Macklowe added a team from brokerage Douglas Elliman to supplement the developer's internal sales team tasked with selling the tower's units.[64] By early 2016, several websites reported that 432 Park had been officially completed on December 23, 2015.[65][66][67]

 

Top of 432 Park, following its completion

In June 2016, Macklowe Properties agreed to pay $411.1 million to acquire the building's retail component from CIM.[68] Several months later, it was announced that boutique watch store Richard Mille would occupy part of the ground-floor retail space.[69][70] The 4,200-square-foot (390 m2), two-story store opened in October 2018.[71] At the time, Richard Mille was the only retail tenant. Two months later, auction house Phillips signed a contract for retail space, consisting of 55,000 square feet (5,100 m2) at the base of the building, as well as 30,000 square feet (2,800 m2) underground,[72][73][74] with plans to move into the space in May 2020.[75][76] By the end of 2018, John Barrett also agreed to open a 6,300-square-foot (590 m2) salon on the building's second floor and boutique perfumery Amaffi leased 4,000 square feet (370 m2) on the ground floor.[77] Joanne Podell, broker for Cushman & Wakefield, stated in 2019 that she had to promise lower rents in order to attract retail tenants.[78]

In 2016, Linda Macklowe filed for divorce from Harry Macklowe. As part of the divorce proceedings, she filed a lawsuit in September 2017 claiming that Harry illegally shrunk a condo on the building's 78th floor that Linda had agreed to purchase for $14.4 million. The couple initially agreed to purchase "his and hers" condominiums on the 78th floor in 2013, with Linda occupying the smaller "A" unit and Harry purchasing the larger "B" unit. After paying a deposit of $2.2 million, Linda claimed that the developers delayed closing four times and shrunk her unit from 2,663 square feet (247.4 m2) to 1,766 square feet (164.1 m2), giving the additional space to Harry's neighboring "B" unit.[79] The divorce court judge ordered the tower's developers to give Linda until December 21, 2017, to decide whether to purchase the downsized unit. Linda instead chose to remain at the couple's penthouse in the nearby Plaza Hotel and dropped her lawsuit over the unit's shrinkage in exchange for the return of her $2.2 million deposit.[80] The divorce trial also revealed that Macklowe earned just $2.5 million from his investment in 432 Park Avenue and held only a $15.7 million equity stake in the retail portion of the development.[81]

Following his subsequent marriage to Patricia Landeau, Macklowe installed a 1,008-square-foot (93.6 m2) portrait of the couple taken by Studio Harcourt on the northwest corner of the tower's retail space in March 2019. The wedding's 200-person reception took place on the building's 78th floor in a condo that was turned into a temporary ballroom.[82] The building also hosted an event for theater director Robert Wilson's Watermill Center as part of the Park Avenue Armory's "Armory Week" of art sales in January 2018. The event, attended by Macklowe, Zac Posen, and Claude Grunitzky, was notable for employing multiple nude performers in a departure from the more classically focused events of Armory Week which centered on 18th and 19th century art.[83]

Allegations of defects and complaints by residents were published by The New York Times in early 2021.[84][85][86] According to the report, a leak at a mechanical floor forced two elevators out of service for several weeks in 2018. Flood damage has been reported in several apartments, and at least one would-be buyer reneged due to that issue. Other complaints have included high wind trapping a resident inside an elevator and causing "creaking, banging and clicking noises", which, according to structural engineers, are issues that have been affecting multiple supertall skyscrapers. A study commissioned by a group of residents found 73 percent of mechanical, plumbing, or electrical infrastructure in the building was not built to plans. In response, general contractor Lendlease said they had contacted CIM and Macklowe about the issues. Residents have also taken issue with the high annual costs of the private restaurant service (which rose from $1,200 per household in 2015 to $15,000 in 2020) as well as the 300 percent increase in insurance costs during a two-year period.[84]

Due to these and other issues with the building, the condo board sued CIM Group and Macklowe Properties in September 2021.[87][88] An engineer hired by the board discovered an alleged 1,500 flaws in the building.[87][88] At the time of the lawsuit, only one apartment sale at the building had been finalized since the beginning of 2021, even though there were 11 vacant units.[88] Prior to Labor Day in 2021, the entire building had to be vacated for two entire days for extensive repairs in the building's electrical system.[89][90] CIM filed its answer to the lawsuit that December, claiming that the safety complaints were "vastly exaggerated".[91][92]

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